Counting oil sands in reserve replacement

Exxon’s ability to replace its oil reserves is almost as legendary as its profitability. While many of its supermajor rivals struggle to make it to 100 per cent, Exxon reported a 103 per cent replacement in 2008.

Steve LeVine asked Exxon why its news releases and annual reports have put the replacement rate at more than 100 per cent for the past nine years, while its 10K filings to the SEC only put it at more than 100 per cent for four out of those nine years.

Strictly speaking, SEC rules don’t permit comingling of oil that’s pumped out of the ground, along with oil sands — exceptionally tar-like material that in most cases isn’t pumped, but instead is actually mined like a mineral, then mixed with chemicals in order to move it to a refinery for processing. But companies can comingle them in public announcements such as news releases and annual reports that are read by reporters, investors and Wall Street analysts, according to an SEC spokesman.

From next year, however, this discrepancy won’t be a problem: after lobbying from the industry, LeVine writes, the SEC will allow oil companies to include oil sands along with their regular crude oil reserves.

Related links:

Exxon, the chase for reserves and the oil sands (The Oil and the Glory)
A Brent with no North Sea oil? (FT Energy Source)

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